Beijing Bank Bailout May Help Farmers

Among China's many troubled banks, the Agricultural Bank of China (ABC) has long given Chinese officials the biggest headaches. Established in 1979 to provide financial services to peasants, the Beijing-based bank has accumulated more bad loans—$120 billion at the end of 2007—than any other Chinese state-owned bank. For years, Chinese policymakers have debated proposals to reform the state-owned bank and turn it into a publicly listed commercial bank, but they haven't taken any action.

On Oct. 21, Beijing finally approved a restructuring plan. In the biggest bailout ever for a Chinese bank, ABC will receive a $19 billion capital infusion from the Ministry of Finance and from Central Huijin, a subsidiary of China's sovereign wealth fund, China Investment Corp.. Each will take a 50% stake in the bank. Agricultural Bank is the last of China's so-called "Big Four" state-owned banks to get a government bailout. Since 2003, the state has spent $60 billion to recapitalize the other three banks: Bank of China, China Construction Bank, and Industrial and Commercial Bank of China, and restructure them and list them in Hong Kong and Shanghai.